Samsung makes massive $8bn bet on connected cars

Samsung has revealed its $8bn acquisition of Harman International Industries, a key player in the connected automobile landscape. It’s the South Korean company’s biggest acquisition ever.

Who needs a Galaxy Note7 after all? Samsung’s smartphone woes may still be smouldering beyond the hill but the technology giant has its eyes on a different prize: connected cars.

The inevitable next stage in vehicular evolution, connected cars are predicted to dominate the market in the coming years, with companies scrambling to acquire the expertise and resources needed if and when the industry explodes.

Samsung is scrambling perhaps more than most, judging by its latest record-breaking acquisition of Harman International Industries for $8bn.

Harman is a major player in both audio equipment and connected cars, with over 50pc of its $7bn sales in the past 12 months dedicated to the latter.

Samsung is confident that the deal will “immediately” change the game, giving it “significant presence” in the connected automotive electronics world, which has been a strategic priority for the company, potentially growing it to over $100bn by 2025.

Samsung claims Harman’s experience “designing and integrating sophisticated in-vehicle technologies”, alongside its extensive partners and contacts in the industry, will lead to significant growth opportunities.

“The vehicle of tomorrow will be transformed by smart technology and connectivity in the same way that simple feature phones have become sophisticated smart devices over the past decade,” said Young Sohn, president and CSO of Samsung Electronics.

“We see substantial long-term growth opportunities in the auto technology market as demand for Samsung’s specialised electronic components and solutions continues to grow.

“Working together, we are confident that Harman can become a new kind of Tier 1 provider to the OEMs by delivering end-to-end solutions across the connected ecosystem.”

Given the estimated valuation deterioration of over $13bn due to the Galaxy Note7 disaster, this Harman deal adds to Samsung’s outgoings in recent months. However, should the connected car industry perform as well as expected, it may prove a vital source of future revenue for the company.

According to Reuters, Samsung’s interest in this industry doesn’t end here, either. Talks are underway with Fiat Chrysler Automobile over a potential sale or partnership for its Magneti Marelli auto parts maker.

Updated, 9.45am, 14 November 2016: This article was updated to reflect the portion of Harman sales that are in the connected cars sphere.